SIX FIGURE SETTLEMENT OBTAINED FOR INJURIES RELATED TO A SLIP & FALL

When a woman slipped and fell on an unnatural accumulation of snow and ice fracturing her ankle, she turned to the legal team of Baker, Braverman & Barbadoro, P.C. to protect her rights.  The litigation team conducted an immediate investigation of the premises where the accident occurred, conducted interviews, and collected all relevant data to establish liability quickly.

Once the client had reached a medical end result thereby concluding her medical treatment and all the medical bills had been established, the litigation team was able to present her case to the insurance company and expeditiously resolved the claim for $400,000.00.  Due to the expertise of the litigation team at Baker, Braverman & Barbadoro the client was able to avoid lengthy litigation and was able to resolve her claim successfully with minimal stress.

The litigation team worked with the medical providers, experts, the insurance company, and the client to achieve an excellent outcome for the client.  At Baker Braverman & Barbadoro the attorneys are dedicated to achieving the best result for our clients and will advocate zealously on their behalf. Lisa Bond, Esq.

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Why Divorce Mediation is Right for You

Mediation is the process of resolving your divorce on your own terms.  A mediator works with both parties to help them achieve resolution of their disputes.  Mediation, particularly in the age of the COVID-19, provides several benefits which include:

  • Less expensive than litigation.
  • You avoid the backlog in the Courts providing a more expedient resolution.
  • You can determine the outcome of your case without having a Judge make important decisions about your lives.
  • You can make decisions jointly; who knows what is better for you and your family than you?
  • You can address issues that a Court will not entertain. For example, a custody arrangement for family pets, complicated parenting plans, etc.
  • Mediation allows for privacy. The court is an open forum and many of the private aspects of your life will be discussed in public.
  • Mediation participants are more satisfied and more likely to see the process as fair compared to those who elect to litigate.

After a successful mediation, your Separation Agreement must be drafted by a Lawyer.  Attorney Lisa Bond is a trained divorce mediator with almost 20 years of experience in divorce and family law with the capability of conducting mediations both in person and via Zoom.  Please contact Attorney Bond to discuss if mediation is right for you. – Lisa Bond, Esq.

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BBB Celebrates 25 Years!

The Quincy Law Firm of Baker, Braverman & Barbadoro recently celebrated 25 years of providing Premium Legal Services to Clients in the Greater Boston and South Shore areas. The celebration was held outdoors at the firm’s offices at 300 Crown Colony Drive. Lunch was provided by Montilio’s “On The Go” Wood-Fired Mobile Pizza Oven.

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Paul Barbadoro Re-Elected Chairman of Quincy College Board of Governors

Congratulations to BBB Partner Paul Barbadoro on being unanimously re-elected to a 2 year term as the Chairman of the Board of Governors of Quincy College!

https://quincycollege.edu/about/board-of-governors/

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Six-Figure Settlement Obtained for Motor Vehicle Accident

When an injured woman was involved in a car accident, she turned to Baker, Braverman & Barbadoro, P.C. to protect her rights. The litigation team at BBB lawyers investigated the accident quickly and established liability on the part of another negligent driver. The client’s injuries included a broken hand and a fractured finger.

Once the client’s injuries were stabilized and the medical costs ascertained, BBB Attorney Richard C. Ash was able to present the case to the defendant driver’s insurance company and expeditiously achieve a settlement for the full insurance policy of over $100,000.00. Attorney Ash was able to achieve a settlement without filing a formal complaint or mediation, which resulted in huge savings of money and time. Attorney Ash negotiated medical bill liens with both the client’s private health insurance and Medicare so the client was able to forego paying the companies back for most of her care, putting more in her pocket.


At Baker, Braverman & Barbadoro our attorneys are dedicated to achieving the best possible results for clients who are injured through no fault of their own. Richard C. Ash, Esq.

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Recommendations For Landlord & Tenant Re-Negotiations w/ Kim Kroha- Radio Entrepreneurs Interview

“Recommendations For Landlord & Tenant Re-Negotiations” w/ Kim Kroha of Baker Braverman & Barbadoro

YouTube video

Kimberly Kroha, Esq.

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Baker, Braverman & Barbadoro Participates in Chamber Updates regarding Covid-19

Incoming Braintree Chamber chair Kimberly Kroha, Esq. of Baker, Braverman & Barbadoro, P.C. led a zoom video call meeting on COVID-19 update with Mayor Kokoros, State Senator John Keenan and members of the real estate community on May 11 and its impact on real estate in South Shore. Below are some of the highlights.

Coronavirus update from Town Hall

The mayor reported that 78 Braintree residents have died of Covid-19 to date, and 65% of cases are in nursing homes and long-term-care facilities. The number of new cases is declining, although the numbers are “far higher” than could have been anticipated at the start of the crisis.

The mayor expressed his commitment to working closely with business owners to reopen safely after the governor lifts restrictions and issues guidelines.

  • Restaurant owners are very concerned about their ability to survive financially if social distancing requirements require them to operate at reduced capacity. The town will investigate using public property for outdoor dining, such as parking lots or French’s Common. Street closures and sidewalk dining are likely unfeasible.
  • Hair salons and personal services might be best equipped to reopen because frequent sanitization is already part of their daily business practices.
  • The mayor is skeptical that the town’s summer programming, including community events, will be possible due to safety concerns with large gatherings. “If we don’t maintain reduced numbers of folks in public places,” the mayor said, “we’re going to end up with a spike and it will put us in a bad situation come Fall when we need to have school go back in session.”
  • Braintree Golf has reopened with distancing rules in place.
  • The town is working to procure face masks and hand sanitizers for local businesses.
  • The mayor encouraged the state legislature to consider ways to direct insurance companies to pay out business stoppage claims.

“We want everyone to get back to work, but we also don’t want everyone to get exposed,” the mayor said. Given that Braintree’s numbers are higher than the state average, the town likely will require stricter measures than those ordered by the state, he added.

What landlords and tenants are saying

Kim Kroha, Esq. of Baker, Braverman & Barbadoro, P.C. conveyed news from her law firm’s commercial real estate practice:

  • The state moratorium on evictions and foreclosures applies to residence and “small business premises units,” defined as for-profit or nonprofit organizations with fewer than 150 employees that operate in Massachusetts only. Fewer protections are in place for renters who defaulted prior to March 10.
  • The law allows landlords to use last-month rent in lieu of missed payments, if they follow the procedures for notification.
  • Her firm’s commercial landlords are getting 25% to 50% of May rents.
  • A good strategy is to practice open communication regarding inability to pay. This applies to landlords and their mortgage lenders, and to tenants and their landlords. Lenders strongly encourage landlords to contact them to negotiate a deferred payment plan rather than skip payment without notice. Landlords also are advised to be certain that any communications they send to tenants regarding missed rent payment contains notification of Covid-specific rights.
  • Looking ahead, many clients are tweaking force majeure [1] clauses in leases and reconsidering their space needs in anticipation of extended social distancing.

Source: https://www.southshorechamber.org/braintreechamberblog/covid-19-update-with-mayor-kokoros-impact-on-real-estate

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What does the Foreclosure and Eviction Act Mean for You?

On Monday, April 20th, Massachusetts enacted new landlord, tenant, and mortgage laws related to COVID-19 financial impact that affects residential and commercial properties, including limits on foreclosure laws and eviction proceedings (Chapter 65 of the Acts of 2020).

What properties are affected?

  • All residential tenants and certain small business tenants are protected from nonpayment evictions, late fees, and other eviction reasons discussed below.
  • Certain residential properties are protected from foreclosure.

What does the law mean for small business tenants and landlords?

  • The law applies to small business tenants that operate only in Massachusetts and can include for-profit and nonprofit companies subject to size limits.
  • Small business protections include late fee arrangements and limits on notices and eviction proceedings for post-COVID defaults.

What does the law mean for residential tenants and landlords?

  • Residential tenant protections include late fee arrangements and extensive limits on eviction notices and eviction proceedings unless there is a health or safety reason for the eviction.
  • Landlords can commingle funds held for last month’s rent for immediate use on landlords’ allowed obligations, but the amount must still be credited against the tenant’s last month.

What does the law mean for residential homeowners and mortgagees?

  • Protected residential homeowners must generally occupy a 4-family or less dwelling as a principal residence without having leveraged the property as security for a commercial loan.
  • Protections include limits on foreclosure and requirements for lenders to offer forbearance agreements if the homeowner is financially impacted by COVID-19.

What is the timeframe?

  • These protections and restrictions will likely be effective until at least August 18, 2020 but can be extended up to 45 days after the COVID-19 state of emergency has ended.

The act does not relieve tenants or borrowers from paying their obligations. If you need assistance negotiating an arrangement with your tenant, borrower, landlord, or lender or advice about how to proceed against a nonpaying party, please contact our real estate attorneys at Baker, Braverman & Barbadoro, P.C. and we can help navigate the best strategy. Our real estate team includes leasing, foreclosure, and eviction lawyers in Massachusetts.  Baker, Braverman & Barbadoro, P.C. Kimberly Kroha, Esq.

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The CARES Act: Stimulus, Small Businesses, Safety Net

The 2.2 trillion dollar “Coronavirus Aid, Relief, and Economic Security Act” (the “CARES Act” or the “Act”) was signed by President Trump on March 27, 2020. The sweeping reform provides assistance to individuals and a large sector of businesses. The attorneys at Baker, Braverman & Barbadoro, P.C. (“BB&B” have compiled this list of important provisions in the CARES Act. Please be advised that this article does not constitute legal advice. Please contact the corporate, employment, bankruptcy, and real estate attorneys at BB&B with questions about your particular circumstances.

Individual Stimulus Payments and Consumer Protection

The CARES Act includes severalelements aimed at helping keep people engaged in the economy. That means direct cash for many, plus expanded unemployment benefits and new rules for things like filing your taxes and making retirement contributions.

 Tax Credits:

In 2020, taxpayers will benefit from a tax credit equal to the sum of: $1,200 for single filers ($2,400 for those filing a joint return) plus $500 for each qualifying child.  These tax credits will be “phased-out” by 5% of the amount by which such eligible taxpayer’s adjusted gross income exceeds $150,000 for joint-filers, $112,500 for heads of household, or $75,000 for all other types of filers.  This means, for example, the tax credit will not apply at all for childless joint-filers that make $198,000 or more.

The cash payments are based on either your 2018 or 2019 tax filings. Individuals who receive Social Security benefits, but don’t file tax return are still eligible. These individuals don’t need to file taxes; their checks will be based on information provided by the Social Security Administration.  In general, the payments will be distributed to all eligible taxpayers in the same manner that each individual received their 2018 or 2019 tax refunds.

Coronavirus-Related Retirement Plan Distributions:

A “coronavirus-related distribution,” as defined under the CARES Act, is any distribution from an eligible retirement plan made during the 2020 calendar year to an individual who is diagnosed with COVID-19; whose spouse or dependent is diagnosed with COVID-19; or who experiences adverse financial consequences as a result of being quarantined, furloughed or laid off or had hours reduced, or other factors as determined by the Secretary of the Treasury during the COVID-19 pandemic.

Qualified employer plans may permit individuals who elect to receive a “coronavirus-related distribution” from their retirement plans will not be subject to the normal 10% tax penalty imposed under the Internal Revenue Code for early withdrawals, unless the aggregate amount of such distributions from all plans maintained by that employer are over $100,000. However, these distributions are still subject to regular income tax.

Any individual who receives a coronavirus-related distribution may generally, at any time during the 3 year period beginning on the day after the date such coronavirus-related distribution was received, make 1 or more contributions in an aggregate amount not to exceed the amount of such distribution to an eligible retirement plan of which such individual is a beneficiary. The repayments of the payment will be treated as having received the coronavirus-related distribution in an eligible rollover distribution.

Effects on the Limits on Loans from Qualified Employer Plans:

Limits on loans from an employer plan made to individuals during the six-month period beginning on the date of enactment will be increased from $50,000 to $100,000.  In addition, should the due date of any loan occur between the date of enactment and December 31, 2020, it will be delayed for 1 year.

Required Minimum Distributions Threshold:

The CARES Act temporarily waives the minimum distribution requirements for most contribution plans (i.e., 401(k) plan) or IRAs.  This applies for all required minimum distributions that otherwise would have been required to be made in 2020.

Tax Treatment of Charitable Donations:

The CARES Act allows taxpayers to take an above-the-line tax deduction for charitable contributions of up to $300 for the tax year beginning in 2020.  Further, except for certain exclusions specified below, the carryover restrictions on charitable and other “qualified contributions” are disregarded.  Said exclusions are as follows:

  • Qualified contributions for individuals will be allowed as deductions if the combined contributions do not exceed the excess of the individual’s adjusted gross income over or the amount of the charitable contributions made by the individual under certain other provisions of the CARES Act.
  • Contributions made by corporations will be allowed as deductions only if these contributions do not exceed 25% of the taxable income of the corporation over the amount of all other charitable contributions allowed under the CARES Act.

 Foreclosure and Eviction Protection:

The CARES Act prohibits foreclosure of Federally-backed mortgage loans on residential real property of 1-4 units for 60 days beginning March 18, 2020. Additionally, borrowers on such loans may request forbearance based on financial hardship during the COVID-19 emergency, for up to 2 periods of 180 days. Multi-family borrowers also qualify for a more limited forbearance program for up to 3 periods of 30 days. The Act also prohibits eviction filings for 120 days against residents of property that has a Federally-backed mortgage loan or that participates in certain covered housing programs.

Unemployment Relief and Employer Guidance

The CARES Act greatly expands the classes of individuals covered by unemployment insurance, increasing both the monetary benefits and duration of the same.

Workers Covered by the Expanded Program:

The plan includes a lot more workers than are typically eligible for unemployment. Workers covered now include:

  • Workers that have lost their job due to COVID-19 (e., the employer shut down);
  • Workers that have symptoms of COVID-19, tested positive for COVID-19, or self-quarantined as a result of COVI -19;
  • Workers that have to care for a family member diagnosed with COVID-19;
  • Workers whose child’s school or daycare is closed down because of COVID-19;
  • Self-employed workers;
  • Part-time workers;
  • Gig Workers (e., Uber, Lyft);
  • Freelance workers;
  • Independent Contractors;
  • Workers that were about to start a new job but were laid off because the business closed due to COVID-19; and/or,
  • The unemployed dependent of a head of household who died as a result of COVID-19.

Workers Not Covered by the Expanded Program:

  • People that can work from home and receive payment for their work; and,
  • People who quit their job (or want to quit their job) out of fear of being exposed to or contracting COVID-19.

Monetary Benefit:

The increased monetary benefit varies by state. If Massachusetts enters into an agreement with the Secretary of Labor, eligible workers may get an extra $600 of Federal Pandemic Unemployment Compensation (“FPUC”) per week on top of their state benefit. The goal is to get workers close to their full pay. States have the option of providing the entire amount in one payment or sending the extra portion separately.  However, it must all be done on the same weekly basis.

In Massachusetts individuals eligible for unemployment benefits typically receive 50% of their average weekly wage up to a maximum benefit of $823 per week. The “average weekly wage” is calculated by taking the wages for the 4 prior quarters (or 1 year), determining the 2 highest quarters then those 2 quarters are added together and then divided by 26 (the number of weeks in the 2 combined quarters), resulting in the “average weekly wage”. The “average weekly wage” is then divided in half to determine the weekly benefit amount.

Therefore, for example, if a worker (with no dependents, and full eligibility under MA unemployment)  made $50,000 during the 4 prior quarters (or 1 year), the average weekly wage would be $961.54, which would be divided in half making them eligible for $ 480.77 per week under Massachusetts unemployment. Under the new expansion, if Massachusetts ends up providing the worker the full additional $600 of FPUC per week, that individual would receive a total of $1080.77 per week. Massachusetts has not yet finalized their regulations with respect to the FPUC unemployment income, and as of yesterday Governor Baker urged workers to wait to apply for this benefit until final guidance has been issued.

Duration of Additional Benefit:

The CARES Act provides all eligible workers with an additional 13 weeks of unemployment benefits subject to a cap. Many states already provide 26 weeks of benefits, Massachusetts provides 30 weeks. Therefore, participants in states with 26 weeks would be eligible for a total of 39 weeks. The total amount cannot exceed 39 weeks, therefore in Massachusetts eligible workers will receive an additional 9 weeks.

The extra $600 payment will last for up to 4 months, covering weeks of unemployment ending July 31, 2020 (if approved and provided right now).

Expanded coverage would be available to workers who were newly eligible for unemployment benefits for weeks starting on January 27, 2020, and through December 31, 2020.

Those Already Receiving Unemployment Benefits Will Still Receive the Extra Benefit:

If you’re already receiving unemployment benefits for reasons unrelated to COVID-19, your state-level benefits will still be extended by 13 weeks.

Workers already receiving unemployment for reasons unrelated to COVID-19 will also receive the extra $600 weekly benefit from the Federal government (if approved and provided right now as set forth above).

If Unemployment Benefits Recently Ran Out, You Are Eligible to Reapply:

If unemployment benefits have recently exhausted, eligible workers can generally reapply.  The details depend on the state where that individual worked. All eligible workers get at least another 13 weeks, along with the extra $600 payment (if approved and provided as set forth above).

When to Expect the Unemployment Compensation and the Additional Benefit:

States have been incentivized to waive the one-week waiting period, and Massachusetts has already done so. Unfortunately, with the number of new claims being filed daily, it is unknown how long it will take to process claims given the huge spike in the filing of claims and each local state offices’ abilities to process the claims.

The additional $600 Could Make You Ineligible for Need-Based Programs:

The additional $600 benefit, if provided, counts as income when determining eligibility for means-tested programs, except for Medicaid and the Children’s Health Insurance Program (commonly known as “CHIP”).

Paycheck Protection Loans and Small Business Benefits

The CARES act includes new loan programs to assist small businesses, the cornerstone of which is the $349 billion Paycheck Protection Program. The goal of the Paycheck Protection Program is two-fold: 1) to incentivize small businesses to retain their employees; and 2) to help small businesses cover their operating costs during this challenging time. The covered period for the Paycheck Protection Program is from February 15, 2020 to June 30, 2020.

The Paycheck Protection Program:

The Paycheck Protection Program (“PPP”) provides an estimated $349 billion under the Small Business Administration (“SBA”)’s existing 7A Lender Program to assist businesses with keeping employees on payroll, paying rent or mortgage interest payments on business property, insurance premiums, utility bills and interest on other debt incurred before February 15, 2020.

PPP Loan Features:

The key features of the PPP loan are as follows:

  • Eligible borrowers include small businesses (those with under 500 employees or under the applicable SBA industry standard), 501©(3) non-profits, sole-proprietors, independent contractors, veteran’s organizations and certain Tribal businesses. The business must have been in business paying employees or independent contractors on February 15, 2020.
  • Borrowers can receive a loan up to 2.5 times the average monthly payroll costs (equivalent of 10 weeks of payroll costs), with an overall cap of $10 million. Payroll costs are broadly defined to include wages, salaries, IRA or 401K contributions, healthcare benefits, paid time off or other paid sick leave and other related expenses.
  • Loan proceeds are to be used to support payroll, mortgage interest payments or rent payments, utility payments and insurance premiums. Loan proceeds can also be used to pay interest on other debt obligations incurred before February 15, 2020, but such payments will not be eligible for the forgiveness grant provision described below.
  • There will be no personal guarantees required from the business owners.
  • There will be no security requirements.
  • Borrowers do not have to demonstrate current actual economic harm but will be required to certify that the loan is necessary due to the economic conditions caused by COVID-19 and that they will use the funds for the covered purposes.
  • There will be no payments for at least the first 6 months and up to the first 12 months from the date of disbursement.
  • There are no fees incurred by the borrower or the lender for the PPP program.
  • PPP Loans include a unique forgiveness grant feature, which allows for a borrower to apply for loan forgiveness based upon the use of the loan proceeds as intended. The forgiveness feature is discussed in more detail below.
  • After 1 year, all remaining amounts due on the loan that are not forgiven will convert to a term loan of 2 years years with an interest rate of 0.5%.
  • Borrowers will not be able to receive a PPP loan if they have already received SBA funds under the SBA’s disaster loan program or the Economic Injury Disaster Loan (“EIDL”) for the same purpose. However, EIDL loans originated after January 31, 2020 may be refinanced and added to the businesses’ PPP loan total.

How PPP Loans Differ from Traditional SBA Loans:

The PPP loan program has several important distinctions from the traditional SBA 7A loan program. For PPP borrowers, the following changes have been made:

  • SBA has waived its “credit-elsewhere” test, which generally prohibits borrowers who have the option of other credit options from receiving SBA loans.
  • SBA has waived its affiliation rules for hospitality and restaurant industry borrowers and franchisees, which measures eligibility by including their affiliates.
  • As noted above, SBA has waived the requirements of personal guarantees and security for the loan.
  • The forgiveness grant feature is unique to the PPP program.
  • The SBA’s guaranty of the PPP program is 100%, as compared to traditional SBA programs which range from 50%-90%.
  • SBA has waived all borrower guarantee fees for the PPP program.

 PPP’s Forgiveness Grant Provision:

Arguably the most important feature of the PPP loan is the forgiveness provision, which essentially turns the loan into a grant to the business. Provided that the business has used the loan proceeds for their stated purposes, including employee wages (note that amounts over $100,000 per employee or contractor are excluded), mortgage interest payments, rent payments, utilities and insurance premiums, then the business can apply to the lender for loan forgiveness. The amount of forgiveness will be based on a formula that centers around employee retention and appropriate use of loan proceeds, the intended effect of which is to have the loan forgiveness amount equal to the sum spent on covered expenses during the 8-week period after the loan is disbursed to the business.

Forgiven amounts will not count towards gross income attributable to the borrower for tax purposes.

In order to qualify for PPP loan forgiveness, the business must maintain its pre-COVID-19 level of full-time equivalent employees. Importantly, if some businesses already laid off employees in response to the crisis, the PPP program allows them to re-hire them prior to June 30, 2020 and still be eligible for the loan forgiveness.

If the business has not retained its workforce, the loan forgiveness amount will be reduced proportionately.

After 1 year, the amounts forgiven will come off of the loan balance, with the remainder rolled into a term loan of 2 years with monthly principal and interest payments, (interest is capped at 0.5%).

Interaction with other Federal Programs:

As noted above, if a business has already received SBA funds through the EIDL disaster loan program then it can not receive a PPP loan for the same purpose. However, EIDL loans originated after January 31, 2020 may be refinanced and added to the PPP loan total.

It is also important for businesses to understand that if a business obtains a PPP loan, it will not be able to use the payroll tax credits issued through the Families First Coronavirus Act for employee retention. Likewise, a business with a PPP loan cannot defer the employer-wised social security payroll taxes available under other sections of the CARES Act.

How to Apply for a Paycheck Protection Loan:

In order to facilitate the fast roll-out of the PPP Loan, the SBA is utilizing its existing SBA lending banks to finance the PPP loans and may also authorize new lenders. Borrowers must apply through one of the authorized SBA lender banks, not through the SBA itself as is required for the SBA’s disaster loan program. The list of SBA approved lenders can be found here: https://www.sba.gov/funding-programs/loans/lender-match.

Although the PPA loan program has not yet begun to accept applications, we expect them to be available in the coming days and will provide an announcement when SBA lender banks are able to accept applications.

When Continuation is Not Viable without Reorganization:

For businesses with viable income strategies but high debts that could benefit from bankruptcy reorganization, Section 1113 of the CARES Act provides temporary modifications to the bankruptcy code. The CARES Act significantly increases the debt limit under the Small Business Reorganization Act of 2019 (codified under subchapter V of Chapter 11 of the U.S. Bankruptcy Code). Subchapter V was initially designed for smaller, local, or “mom-and-pop” type debtors (an entity or individual) engaged in business with a total debt, secured and unsecured, not exceeding $2,725,625.

The CARES Act increases the debt limit to $7,500,000 for a period of 1 year. Subchapter V is more streamlined than its Chapter 11 counterpart, and it omits quarterly trustee payments and the requirement for both a disclosure statement and a plan, so long as the applicable provisions are all covered in the plan. Subchapter 5 allows businesses that have leveraged the owner’s home to “cram down” or modify the mortgage claim. The provisions grant greater flexibility to the debtor, but the process is designed to be quicker to limit the period of uncertainty for creditors. For both subchapter V and other chapter 11 bankruptcy filings, the CARES Act also excluded COVID-19 payments from the calculation of “disposable income” and allows a debtor to seek modification from a confirmed plan as a result of coronavirus-related financial hardship.

Industry-Targeted Relief and Financial Sector Provisions

The CARES Act provides specific relief to industries most affected by the coronavirus crises, specifically transportation, healthcare, and education. The Act also modifies lender and financial institution rights and requirements.

Direct Funding for Loans, Loan Guaranties and other Investments:

The Act appropriates $500 billion to the Secretary of the Treasury for loans, loan guarantees and other investments to support states and local governments, specific highly impacted industries, and funds for U.S. businesses that have not received “adequate economic relief.” Of this amount, the Act allocates $25 billion for passenger air carriers; $4 billion for cargo air carriers; and $18 billion for “businesses critical to maintaining national security.” Separate provisions of the Act provide additional financial assistance to continue employee wages, salaries and benefits to air carriers and their contractors.

The program provides up to $454 billion for other loans, guarantees, or investments focused on businesses, states or municipalities through the Federal Reserve System. These funds are directed at maintaining employment and liquidity, and eligible businesses must maintain at least 90% employment level (of what they had, using March 24, 2020 as a base) through September 30, 2020. The business must also certify that it is created or organized in the United States, with significant operations and a majority of its business here. The Secretary of the Treasury is also directed, as part of this assistance program, to develop a financial assistance program focused on businesses and nonprofit organizations with between 500 and 10,000 employees that are subject to similar provisions ensuring maintenance of United States employment. The Federal Reserve System may also establish a Main Street Lending Program directed at small and mid-size businesses.  Businesses taking advantage of these stimulus programs must limit compensation of certain highly paid officers and employees.

Banks and other Financial Institutions:

Community banks are granted temporary relief in the form of a reduced leverage capital ratio, allowing the banks to maintain an 8% or greater ratio instead of 9% that would otherwise be applicable. The reduced level is effective until the end of the calendar year or conclusion, of the COVID-19 public health emergency, whichever occurs first.

Lenders of Federally-backed mortgage loans should also see the forbearance, foreclosure moratorium, and eviction moratorium provisions set forth in the consumer protection section.

The CARES Act relieves any depository institution, bank holding company, or affiliate thereof from compliance with Financial Accounting Standards Board Accounting Standards’ credit losses standard until the end of the calendar year or conclusion of the COVID-19 public health emergency, whichever occurs first.

Other Assisted Industries:

The CARES Act directly addresses COVID-19 testing and treatment by requiring health care coverage of certain coronavirus testing and, when available, medicine and vaccines to treat and prevent COVID-19. Furthering that goal, the CARES Act increases grants for COVID-19 drug development. The Act also includes telehealth, medical information sharing, and healthcare education provisions to address modified practices and encourage remote care. Further, Medicare will also temporarily cover up to 90 days of most prescription medicine in a single refill.

From an education front, the CARES Act addresses logistical issues with school and college shutdowns. The Act allows educators to omit affected semester’s grades from grant and loan analysis, and it authorizes continuation of financial aid, work study aid, and other education-related grants that are tied to actual performance. Section 3513 of the CARES Act also suspends federal student loan payments through September 30, 2020 without accruing interest during that period.

Manufacturing companies may also see an increased focus on developing additional facilities in the United States. Section 3101 of the CARES Act requires a national report assessing the dependence of the United States on other countries for health care needs and other items that could be manufactured in this country.

The CARES Act allocates funds to various Federal agencies to respond to coronavirus concerns and develop measures related to COVID-19.

Tax Relief and Extensions

In addition to the individual tax provisions previously discussed, the Federal April 15, 2020, payment and filing deadline has been extended for the majority of tax filings until July 15, 2020. These extensions specifically apply to forms 1040 (including -SR, -NR, NR-EZ, -PR, and -SS) 1041 (including -N and -QFT), 1120 (including -C, -S, -FSC, -H, -L -ND, -PC, -POL, -REIT, -RIC, and -SF), 8960, and 8991. The extension also applies to first quarter quarterly payments.

Important Business Tax Provisions:

Employee Retention Tax Credit. This is a payroll tax credit for 50% of qualified wages paid from 3/13/20 – 12/31/20 for employers whose (1) operations were fully or partially suspended due to forced shut downs; or (2) gross receipts declined by more than 50% when compared to the same quarter the prior year. This credit is capped at the first $10,000.00 of compensation, including health benefits, paid to employees.

  • Deferment of Social Security payroll tax. Employers and those Self-employed can defer the employer share of the Social Security payroll tax. Any amount deferred must be repaid over 2 years with at least 50% being repaid in 2021, and any remaining deferred amount due in 2022.
  • Changes to Net Operating Loss Rules. Net operating losses in 2018, 2019, and 2020 can be carried back 5 years. The 80% offset limitation has also been removed for 2018, 2019, and 2020, allowing businesses to offset up to 100% of taxable income with net operation losses.
  • Excess Business Loss Limitation has been repealed for 2018, 2019, and 2020.
  • Corporate AMT Credits. C-Corps can now obtain a refund of up to 50% in 2018 and the remaining balance in 2019 for carry over AMT credits.
  • Section 163(j) interest deduction limitation have been temporarily increased from 30% to 50% for 2019 and 2020.
  • Qualified Improvement Property (“QIP”). The recovery period for QIP was accelerated from 39 years to 15 years and can be eligible for bonus depreciation. If property is elected out of section 163(j), the alternative depreciation system has been accelerated to 20 years with no bonus depreciation.
  • Any 2020 excise tax due on distilled spirits used as hand sanitizer has been waived.
  • The IRS is not actively pursuing collections and is not issuing new liens and levies. Additionally, installment agreements and offer in compromise payments have been deferred.

If you have questions regarding the CARES Act or strategies for you or your company during this COVID-19 crisis, please reach out to our team at Baker, Braverman & Barbadoro, P.C.  Our attorneys are working remotely but the office is fully functional, and we are ready to assist.

With attorneys available in corporate, employment, bankruptcy, real estate, tax, estate planning, probate, and litigation, we can handle a host of issues that may be affecting you or your business. We look forward to working with you during this unprecedented time. – Richard Ash, Esq., Theresa Barbadoro Koppanati, Esq., Elizabeth Caruso, Esq., Kimberly Kroha, Esq., and Susan Molinari, Esq.

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Can two separate provisions of the CARES Act truly provide a lifeline to small businesses?

The CARES Act passed March 27, 2020 provides several different avenues of relief to individuals, small business and large businesses, airlines and healthcare industries, including COVID-19 small business loans and funding.  Packed into this enormous piece of legislation are several provisions for short term loans for small businesses to be provided under the Small Business Administration program, one of which includes the Paycheck Protection Program (“PPP”).  For a small business to qualify for a PPP loan, it must employ no more than 500 employees, and provide proof that it was in business as of February 15, 2020.  If a small business qualifies, the terms and other provisions of the loan program are quite favorable to the borrower.  They include:

  • Maximum loan amount of $10,000,000;
  • Fixed interest rate of 0.5%;
  • Repayment term of 2 years with potential forgiveness of some of the debt;
  • No fees or pre-payment penalties;
  • No guarantees as the loans will be non-recourse to owners, partners or shareholders;
  • No collateral is required;
  • Payments are deferred for at least 6 months; and
  • Loan proceeds can be used for payroll, taxes, health benefits, utilities, mortgage debt interest, rent, and interest on pre-existing loan obligations.

The PPP is certainly very encouraging considering that the above allowed uses are the overwhelming majority of the average small business’s day to day operational expenses.  The question however, is whether this CARES Act funding truly is a lifeline as it has been touted, or will the delays in implementation and roll- out be too late for many small businesses?  Overwhelmingly, March saw tens of thousands of small businesses shuttered with virtually no advance warning.  Restaurants, pubs, hotels, hair salons, dental and chiropractic practices, concert and music halls, movie theatres, and countless other businesses have closed. Quite possibly, the large majority of these businesses did not have a stockpile of cash on hand or have the necessary funds to pay mortgages, rents, payroll, benefits or their utilities moving forward.   As a consequence, it’s predicted that many of these businesses will succumb to this immediate financial pressure.  Lenders, taxing authorities, landlords and other creditors will probably not sit idly by waiting for this pandemic to pass. They are in business too.  Some are no doubt going to begin exercising their rights and remedies and calling loans, filing tax liens or evicting tenants.  Not to mention the hardship that the employees are experiencing with a lack of compensation and threatening loss of their health benefits.

The second piece of the CARES Act which provides interesting potential relief for small businesses is the increase in debt limits for small business reorganizations.  The Small Business Reorganization Act of 2019 (SBRA) became effective in February 2020, and it provides a more streamlined process for small businesses to reorganize through bankruptcy without the excessive and time consuming requirements of the traditional Chapter 11 reorganization. The small business provision, known as Subchapter V of Chapter 11 of the U.S. Bankruptcy Code, was enacted in August 2019 and became effective February 19, 2020.  As enacted, the SBRA capped debt limits for eligibility at $2,725,625.  Debtors with a debt load greater than this were not eligible.   The CARES Act has temporarily increased this debt limit to $7,500,000, clearly expanding those businesses that can take advantage of the SBRA.  Some of the streamlined provisions of the SBRA include a combined disclosure statement and plan, a relaxation of US Trustee fees, and more importantly, it allows for an early exit out of bankruptcy and the ability of the business owners to retain their equity interest without violating the enormous obstacle of the absolute priority rule that plagues many traditional business reorganizations.

Because the roll-out of the PPP may be delayed some while the SBA and Treasury adopt working regulations, many businesses may fail in the meantime, lose their lease, or fall into tax trouble before this happens.  The SBA and Treasury have been given 30 days to adopt and implement the regulations of the various new loan programs offered under the CARES Act.

Because of this delay in implementation and the inevitable immediate insolvency of many small businesses, I submit that the answer for these nearly doomed businesses would be to take advantage of both provisions.  Hypothetically, an eligible business could file a Chapter 11 under the SBRA that would impose the automatic stay provided in bankruptcy and prevent third party creditors from permanently shuttering them.  Choosing this route would provide the business with 90 days to present a plan of reorganization.   That plan, simply, would be a PPP loan.

Now, to be clear, there is no current express provision in the PPP that allows for a debtor in possession loan—the loan that ordinarily allows Chapter 11 debtors to exit bankruptcy.  That provision would have to be incorporated into the regulations adopted by the SBA.   Debtor in possession loans are often the vehicle used for businesses to complete Chapter 11 and are not traditionally provided by conventional or SBA lenders—they are often too risky.  But in this time of emergency, coupled with the paramount goal of saving our small businesses and more importantly, their employees’ jobs, it makes perfect sense.  Further, considering the relaxation of many traditional underwriting rules for business loans, the PPP is the model debtor in possession loan and could undoubtedly bridge that economic gap and save many businesses from inevitable and ultimate failure.

Contact the attorneys at Baker, Braverman & Barbadoro, P.C. for additional CARES Act law counsel or corporate and bankruptcy advice. Gary Hogan, Esq.

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